Gold is frequently considered to be a popular investment. Investors generally buy gold as a hedge or safe haven against any economic, political, social, or currency-based crises. These crises include investment market declines, inflation, war, and social unrest. Investors also buy gold during times of a bull market in an attempt to gain financially.
From the times of ancient Egyptians, owning gold has been favored as a way to create and to preserve personal wealth. Gold has been known as providing unique advantages over other forms of currency, such as money. Such advantages are inherent to gold, and typically are not found in other forms of currency. For example, gold may be viewed as a consistent unit of account. An ounce of gold remains the same today as it did a hundred years ago. However, sovereign currencies the world over, fiat in nature, are based on the financial strength and credit worthiness of the issuer government and cannot make such a claim. In fact, the one common characteristic of all fiat currencies is that they virtually all have failed to maintain their purchasing power parity over time. For example a U.S. dollar issued in 1913 by the Federal Reserve is worth about just 2 cents in today's market, having lost about 98% of its value. Although a standard form of currency is necessary for trade and commerce in a modern economy, it none the less remains a very poor store of value. The U.S. dollar, Japanese Yen, or even the Swiss Franc that may be deposited in one bank may not be the same as the same currency deposited in a different bank. This may be the case, for example, due to differing levels of capital, mixes of assets, or the like, by the two banks.
Moreover, currency also carries counter-party risk whereas gold bullion has none. Holders of currency are not only exposed to the risk of default from a national crisis, but also to the solvency of the bank holding their deposit. In the US, an attempt to overcome the bank solvency risk is mitigated by insuring deposits at member banks through the Federal Deposit Insurance Corporation (FDIC.) However, the insurance is often limited and the coverage changes at the whim of the government. Additionally, the funds established for this insurance may sometimes be insufficient to cover the losses it was developed to mitigate. Therefore, holding currency carries counter-party risk on several levels, whereas gold bullion, upon its physical possession, has none.
However, determining when any given bank is unable to meet their commitments to their clients to return the client's currency is extremely difficult. Therefore, currency remains at risk. Similar risks also arise with other forms of wealth investments, including stocks and bonds. Investments in various companies through stocks and bonds may simply evaporate virtually overnight, leaving an investor drained of funds. Savings of a particular national currency may also be at risk based on the general economy of that nation, civil unrest, war, or the like.
Thus, many people have recognized that gold or similar precious metals may be a preferred form for wealth preservation. While gold could be purchased through gold certificates, many certificates were typically held by a broker. Such retention often meant that the consumer could not readily negotiate sales or purchases except through the broker. And worse, should the brokerage fail, access to the certificate might become difficult if not impossible. Therefore, many people prefer to maintain possession of their purchased gold. However, until Dec. 31, 1974, the purchasing of gold bullion had been restricted to numismatists and jewelers.
Purchases of bullion through retailers such as jewelers, coin shops, or collectors often means that price negotiations are at the whim of the retailer. Consistency in pricing retail bullion between merchants, however, is often seen as nonexistent and haphazard at best. Other than the international commodities markets where wholesale spot market pricing is determined, there is little effort to mainstream the consumer's understanding of the resale bullion market for consistency or reliability in pricing. Most retail consumers of bullion rely on a successful negotiation at the point of purchase before consummating a purchase of bullion, thereby often walking away unsatisfied, without a purchase, or sale, because of unscrupulous merchant practices or constantly changing pricing schemes. Additionally, the ability to access the retailer may be restricted to certain business hours. Thus, the consumer often must make their purchases or sales during business hours, even though a market price might be better for the consumer at some other time of day or night. Moreover, the retailer, might draw out the purchases of gold until he can make a profit, negotiating purchases of gold with the consumer that may result in significant loses of wealth by the consumer. Each year the courts are burdened with such complaints. Therefore, many consumers seek another way of purchasing bullion that provides ready access to the market, thereby enabling the consumer to take advantage of market value changes in the price of gold.
In addition, many consumers wishing to own gold, silver or other commodities would prefer not to have their identity well known by others, such as jewelers or retailers. This anonymity allows the consumer to sell, or buy, without friends, neighbors, retailers, or others becoming “aware” of their possessions. Such anonymity may be important in providing a meaningful level of safety and security to the consumer. Thus, it is with respect to these considerations and others that the present invention has been made.